Bitcoin (BTC) Slips In Minutes After Steaming-Hot U.S. Inflation

Bitcoin (BTC) slipped on Friday after U.S. CPI data showed inflation was nowhere near cooling.

BTC fell 1.5% in minutes after the reading, which showed that the U.S. consumer price index (CPI) expanded in May, in contrast to expectations for a contraction.

CPI increased by 8.6% year-on-year in May, compared with a 8.3% increase in April, a report from the Department of Labor showed. Markets were expecting a reading of 8.1%.

BTC is now trading below $30,000, with the potential to fall even further. A worst-case scenario predicts the token could fall as low as $15,000 in the short term.

High U.S. inflation now points towards sharper interest rate hikes by the Federal Reserve, spelling more declines for risk-driven markets.

U.S. inflation shows no signs of cooling, Fed to hike

Prices rose across the board, with homes, fuel and food being the biggest contributors to inflation. The data represents a mix of the knock-on effects from the Russia-Ukraine war, as well as the last two years of easy monetary policy due to the COVID-19 pandemic.

It now means that the Fed will have to hike rates even further to combat runaway prices. Data from CME Group shows 95.7% of investors are pricing in a 125 to 150 basis point hike by the Fed during its meeting next week.

The Fed had hiked rates by 50 bps in May. Even that caused BTC to plummet by over 10%. With rising inflation and interest rates, the U.S. economy may be in for a recession- pointing to more trouble for BTC and the crypto market.

Inflation engine is running steaming hot and there is still plenty more to come… Traders and investors are concerned as recession odds are only increasing with every day passing.

Naeem Aslam, Chief Market Analyst at Avatrade

No respite for BTC, crypto

Given BTC’s close link to U.S. technology stocks, the token appears to be likely set for more pain in the coming days. Rising interest rates and high Treasury yields are detrimental towards tech stocks, and in turn, BTC.

Weakness in BTC is in turn expected to be reflected across the crypto market. Most altcoins also turned negative for the day after the inflation reading, mirroring losses in BTC.